How to Conquer the Indian Chaos

In his new book, “Conquering the Chaos: Win in India, Win Everywhere,” former Microsoft India chairman Ravi Venkatesan examines what it takes for multinational companies to succeed in India.

Mr. Venkatesan was chairman of Microsoft India from 2004 to 2011. Prior to that, he was chairman of engine and power generation company Cummins India. He is now on the board of directors at Volvo and Infosys and is founder and chairman of Social Venture Partners India, among other commitments.

Here is an excerpt from his book, which is published by Harvard Business Review Press and released on Tuesday.

How Microsoft India Bounced Back:

“Microsoft is the digital divide,” said India’s IT minister, shortly after announcing the launch of a new low-cost PC running Linux, not Windows. Definitely not a great start to my tenure at Microsoft in India.

In early 2005, Microsoft was at the top of its game Google and a resurgent Apple were in the future, and the primary threat was from free, open source software, which had captured the imagination of governments. Governments were concerned about Microsoft’s large market shares in software and sought a free alternative to make com­puting accessible to millions. As in many countries, admiration for Microsoft and Bill Gates was mixed with distrust. That had much to do with the company’s legal battles with the US Department of Justice and the European Union, but there were challenges in India, too. Microsoft India had gained a reputation for aggressive business prac­tices, unaffordable prices, and the lack of relationships. That’s what we had to change.

EARNING TRUST THROUGH BETTER BUSINESS PRACTICES. Microsoft had sharp elbows in India when it came to doing business. That was particularly true about piracy. Many large Indian enterprises were underlicensed; they used more software than they had paid for. Smaller firms ran almost entirely on pirated software. Every now and then, CEOs would receive an aggressive communication or a threatening visit from an arrogant Microsoft employee.

Microsoft wasn’t wrong to tackle piracy, but such engagements lacked finesse. Moreover, people felt the cost of software was egre­giously high relative to the plummeting cost of hardware. That rankled in a poor country like India. The government worried about the grow­ing digital divide: those with access to IT would do much better than those denied access to it, amplifying inequity. As the industry leader, people expected Microsoft to develop solutions to bridge the digital divide, but the company didn’t seem sensitive to the issue. It was easy for leaders in business and government to see open source software as the panacea. That resulted in a wave of experimentation with Linux and Open Office, with everyone trying to reduce their dependence on Microsoft or using the threat to extract better prices from us.

Fortunately, there was greater sensitivity toward such sentiments in Microsoft’s headquarters in Redmond. An increasingly philan­thropic Bill Gates; Brad Smith, the thoughtful general counsel; and Craig Mundie, the chief technology officer but also a sort of secretary of state for the company, were all highly attuned and receptive to the need for change.

Microsoft decided to implement a differential pricing framework globally and particularly in India. A new public-sector pricing frame­work transparently linked software prices to per capita GDP. A pro­gram called Partners in Learning enabled schools to get Microsoft Office for about $2.50 a year. A version of Windows called Starter Edition for India, which sold for around $20 to OEMs, made an oper­ating system more affordable for first-time PC users. It also made local-language versions of Office available at attractive prices, to which India’s state governments warmed.

To correct the perception that Microsoft Office in India cost $300, the company launched cheaper products for consumers and small businesses—products like Office Home and Student for around $70, and Windows Small Business Server—and made them available everywhere. Start-ups, student developers, and qualifying NGOs enjoyed access to the full suite of Microsoft software free through an imaginative program called Dreamspark. These efforts dramatically reduced the level of dissonance in the ecosystem. While the pricing issue never went away, perceptions of Microsoft as being unrespon­sive steadily changed.

Concurrently, as part of a global mission called Unlimited Potential, Microsoft launched another set of initiatives to bridge the digital divide by increasing the use of computers in India by the less affluent. Microsoft invested over $20 million to provide computer literacy to nearly 700,000 schoolteachers, who have trained almost 32 million schoolchildren and large numbers of retiring soldiers and policemen and their children. With another initiative called Saksham, Microsoft entered into a partnership with the government, NGOs, and private-sector partners to create computer kiosks in 100,000 Indian villages. These programs enabled productive partnerships with key state gov­ernments in an increasingly federal country.

WINNING FRIENDS AND POLICY INFLUENCE. One memorable conversa­tion I had when I was Microsoft India’s CEO was with Deepak Pathak, a professor of computer sciences at IIT Bombay, my alma mater. An ardent supporter of open source software, Pathak was forthright in his criticism of Microsoft, but since I was a former student, tempered it with advice. Most of his advice had to do with building bridges. Microsoft stood alone (“I, me, and myself,” was how Pathak charac­terized us), and came across as arrogant and made no friends. I vowed to change that.

It’s tough to engage key stakeholders in ways that don’t come across as pure self-interest. The intersection between self-interest and the national interest turned out to be policies that would increase the usage of information and communications technologies, and bridge the digital divide. Embedded in this were knotty issues such as the protection of IP rights, technology neutrality in place of a bias toward open source software, the government’s use of IT, and e-governance.

Harvard Business Review Press

Ravi Venkatesan.

The traditional approach to tackling policy issues in India is lobbying. However, those who are in charge of policy and those who influence it are cynical. They are more appreciative of companies that have developed broad national and industry viewpoints rather than narrow company-specific agendas. They expected thought leadership and the ability to bring global expertise and experience from companies like Microsoft. Microsoft India therefore invested in building the capability for thought leadership on issues important to us. We created senior roles—a national technology officer, a chief security adviser, an expert on standards, a cell comprising experts on intellectual property, and a corporate affairs team—to develop the capability to engage with industry bodies and the government. We framed issues around what is good for India and Indian industry, providing global evidence for our point of view, bringing in subject-matter experts from around the world, and creating coalitions for viewpoint. The approach proved to be effective.

Microsoft invested in creating an ecosystem of people and organi­zations that had a stake in developing a healthy policy environment. It ramped up engagement with India’s industry associations, like NASSCOM, FICCI, and CII, in which we chaired influential commit­tees on issues like intellectual property rights, technology and educa­tion, and software taxation. Realizing that Indian companies like Tata, Infosys, and Wipro had more credibility and influence than did foreign companies, we forged alignment with those firms on policy issues.

India’s civil society, consisting of over 3 million NGOs, is an impor­tant voice. Most NGOs tend to be skeptical about the motivations of big business, especially multinationals like Microsoft. Through a pro­gram called Jyoti, Microsoft collaborated with NGOs to support initia­tives to empower unemployed youth, marginalized women, farmers, fisherwomen, victims of human trafficking, and rural self-help groups by providing computer literacy and free access to computers through community centers. Between 2004 and 2011, Microsoft invested about $10 million in this program, training 430,000 people in 1,425 community technology learning centers across 27 states.

Microsoft Research India (MSR), set up in Bangalore in 2005, became a platform for collaboration with top academic institutions and leading computer scientists to advance the state of computer science in India. MSR earned trust and goodwill in two ways. It focused on the burning challenge of fostering more doctoral candidates in computer science, who had numbered only a paltry thirty-five a year at that time. MSR offered internships and fellowships, provided travel grants, and ran summer schools to encourage more computer scientists to complete their degrees and pursue careers in teaching and research. By creating a new discipline called Technology for Emerging Markets MSR India became the hub of a global community of researchers exploring challenges such as machine translation, natural interfaces, and the application of cheap mobile phones and low-cost computing to social problems. Over time, academics and researchers in India, traditionally supporters of open source software, became more balanced in their opinions about Microsoft.

Another vital decision that Microsoft India made was to engage with state governments, and not just the central government. As the central government in India weakens in authority, the action is rap­idly shifting to the states. That’s a positive development. As in China, leaders of many states realize that development is good politics and are vying with each other to attract investment. Their ministers and bureaucrats were keen to work with Microsoft for computer literacy, skills development, and e-governance. When decision making slowed in Delhi, Microsoft was able to make significant progress in fifteen of thirty states. Even in Kerala, where a Marxist government wasn’t too keen about Microsoft, tenacious engagement paid off. Mission critical e-government applications, such as an HR management sys­tem, a road transport application, and the flagship Information Kerala Mission, were built on Microsoft technology.

One of the most sensible decisions we made was to create an advi­sory board for the company comprised of ten thoughtful and influ­ential leaders drawn from diverse fields. Between 2006 and 2010, this board met three times a year with senior executives from Microsoft headquarters in Redmond. It advised the company on many specific issues, but was more helpful in educating Microsoft’s senior leaders on how to do business in India. Its views were instrumental in softening the approach to India. In turn, the members developed an insider’s perspective about Microsoft that they carried with them into India Inc.’s sanctum sanctorum, to which no multinational company usually has access.

MANAGING REPUTATION. The third plank of Microsoft’s turnaround involved a shift away from the traditional PR approach, which was tactical and reactive. A new senior executive drove an integrated com­munications strategy. No longer did we define success in terms of the number of media stories about Microsoft or its share of voice. We focused on a few key messages—“Innovation in India,” “Good for India,” and India’s need to move from renting IQ to creating IP, for instance—and told our stories around these themes.

We leveraged all of Microsoft’s assets in India—Microsoft Research, the India Development Center, thousands of Microsoft partners, and the 1.2 million strong developer ecosystem—to tell these stories. Around each key theme, we ran a 360-degree campaign. We would commission research; have credible academics or analysts write white papers; engage trade associations and organize industry roundtables on the issue; send out newsletters and mailers; and write bylined arti­cles in newspapers and magazines. To amplify the effect, we synchro­nized the marketing campaigns with the communications campaigns. Wherever possible, we tried to make our messages more credible through the endorsement of academics, analysts, and industry leaders. We sustained each campaign for two years, which resulted in messages becoming sticky. The results were impressive. The Indian government’s favorability toward Microsoft, measured through the International Government Elites Survey, went through the roof, with net favorability surging from the fifties to the nineties on a scale of one hundred, well ahead of Google and IBM. Microsoft was consistently recognized as one of the best Indian employers and one of the most respected multinationals in India. The aura turned the company’s reputation from a headwind to a tailwind for sales teams. Indeed, greater trust, more goodwill, and a web of relationships enabled Microsoft to navigate several challenges, such as a bruising disagreement with the Indian tax authorities, a con­frontation with IBM on the issue of document standards, and many attempts by the open source community to get educational institu­tions and local governments to ban the use of Microsoft software.

The government of India, recognizing the importance of intellectual property rights for the IT industry, increased enforcement, and the piracy rate dipped from 75 percent to 64 percent in seven years. The debate on open source versus commercial software evolved into a pragmatic acceptance of mixed source, with a focus on interoperability. The central government maintained its policy of technology neutrality, while many state governments embraced Microsoft. In fact, Microsoft’s government business grew at double-digit rates over the period. Earning trust and respect turned out to be good business.